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Saturday, August 21, 2010

Government urged to access climate fund directly, not through WBCai U. Ordinario
The Business Mirror
August 16, 2010

THE Institute for Climate and Sustainable Cities (iCSC) is urging the Philippine government to access the United Nations Adaptation Fund (AF) directly instead of going through channels like the Washington-based lender, the World Bank Group.

In a statement sent to the BusinessMirror, the iCSC said there is a proposal to have the $15-million Flood Early Warning System project—implemented by the Department of Public Works and Highways (DPWH) and the Philippine Atmospheric, Geophysical and Astronomical Services Administration (Pagasa)---funded by the AF through the World Bank.

The iCSC said the World Bank is trying to push for “more climate loans” instead of the country accessing the multibillion-dollar AF directly by submitting a proposal to the Adaptation Fund Board (AFB) which manages the fund.

The AF is the first financial instrument under the UN Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol (KP).

“The World Bank-crafted proposal shows the World Bank inserting itself as the Philippine funding conduit to the AF. The document shows the World Bank colluding with unwitting officials from the [DPWH] and the [Pagasa] through a prospective $15-million AF grant. Under the proposal, the World Bank serves as an intermediary institution that will access the AF on behalf of the Philippines,” the statement said.

“It carries provisions that deliberately contradict the Philippine position in international climate-finance talks, which champions the promotion and operationalization of adaptation finance directly accessed by developing countries and free of MDB intermediaries. The proposal is not based on the country’s adaptation action plan and will likely squander urgently needed financial resources from the AF,” the statement added.

Joe Tuyor, World Bank East Asia and the Pacific Region Philippine Sustainable Development Unit Senior Operations Officer, told the BusinessMirror in a phone interview over the weekend that the details of the project have reached the bank, but the matter has not yet been acted upon because the project was not endorsed by the Department of Environment and Natural Resources (DENR) and the Climate Change Commission (CCC) for funding under the AF.

Tuyor explained that accessing the AF could be done through multilaterals like the World Bank and United Nations Development Programme (UNDP), or directly by submitting a proposal to the AF board.

He stressed that it is still for the Philippine government to decide whether or not to have a particular project submitted for funding under the AF, and what kind of modality it will use to obtain AF funding.

“Countries can submit proposals direct to the adaptation board without going through the World Bank or UNDP, the other implementing agency of the adaptation fund. The guidelines for accessing the fund is available in the fund’s web site,” Tuyor said in a text message.

Tuyor added that based on their discussions with State officials in June, the bank and the government decided to postpone the evaluation of the proposal until after the Philippine Action Plan is drafted and completed by the CCC.

As the country’s sole policymaking body on climate change and other related programs and projects in the government, the iCSC said ensuring that projects like these are closely monitored is a priority.

However, in a recent statement, Senate President Juan Ponce Enrile said some actions of the CCC, a collegial body headed by the President, have only been decided by the vice chairman, the position occupied by former Environment secretary Heherson Alvarez.

Because of this, Enrile is also pushing for the amendment of Republic Act 9729 or the Climate Change Act, which created the CCC.

“This is a case of malicious intention on the part of the World Bank, which should be aware of the country’s long-held preference for the direct-access modality of the adaptation fund. But this is also an indication of the Commission’s cluelessness. This condition means it is part of the reason behind the governance chaos plaguing the administration of climate finance in the country,” iCSC Executive Director Renato Redentor Constantino said.

Alvarez, on the other hand, said the CCC is aware of all adaptation projects, including the ones discussed before the CCC was given its full mandate.

He said he has already submitted the country’s National Framework Strategy on Climate Change to a United Nations body to access the AF in a recent conference in Bonn, Germany.

Alvarez also said having a framework sent the signal to the UN that the Philippines is now ready to access the fund. He also said that on Tuesday, the CCC will meet with the DENR to discuss how to access the fund and what projects can be funded under the AF.

“The WB is clearly to blame for attempting to pull a fast one. But we have become easy prey because of the commission’s incompetence. The vice chairman is unaware of the World Bank (WB) submission. Worse, the same person has tried to access the AF by submitting the wrong document to the wrong body,” Constantino added.

Based on the project document obtained by the iCSC, the lion’s share of the funding will be for the $5.3-million National Early Warning Center, which will command and control the early warning system.

Other big items to be funded include the $2.4-million procurement of hardware and software for the system, and $2-million feasibility study for priority investments for the Bank’s identified Master plan for flood management in Metro Manila.

“The WB proposal intends to fund yet more feasibility studies [costing $2 million], for priority investments to be identified under a WB-financed flood-management plan, instead of concrete-adaptation projects called for by the Philippines. In addition, though feasibility studies are critical, the effort must at least be based on a country’s agreed priority needs,” the iCSC said.

Other items to be financed include the $1.514-million project to rehabilitate and upgrade flood control operation systems and the $1.15-million management fee for the WB.

“The proposal will waste $1.514 million to rehabilitate failed projects which, based on flawed designs, should probably not have been financed in the first place,” the iCSC said. “The total project cost of the WB proposal amounts to $13.85 million and allocates for the WB $2-million representing management costs, bringing the total financing proposal to $15 million.”
The iCSC said the Philippines played a central role in pushing for the creation of the AF, which represents, among global climate funds, the benchmark in terms of accountability principles, democratic governance, and innovative funding modalities.

The AF has the potential to generate greater resources. Unlike other global climate funds, the AF is not Official Development Assistance-driven and instead is funded by a 2-percent levy on Clean Development Mechanism (CDM) transactions.

Currently, iCSC data showed that revenues generated from the CDM levy are projected to be between $160 million and $950 million. Ongoing discussions indicate that the application of levies on international air travel may generate an additional $4-10 billion annually. The AF has also begun to receive bilateral funds, with Spain contributing $60 million recently.

The World Bank is actively undermining the ability of the Philippines to (1) access urgently needed, untied adaptation finance and (2) operationalize direct access-driven financing modalities. Documents and related information recently acquired by the Institute for Climate and Sustainable Cities (iCSC) expose plans by the World Bank to deny the Philippine government the option to directly access resources from the UN's Adaptation Fund (AF) and potentially impose more climate loans.

Lodged in the AF is the direct access finance modality, which, based on agreed rules, provides particularly developing countries like the Philippines the option to directly access funds in the AF without having to pass through multilateral development banks (MDB) such as the World Bank. Long championed by the Philippines, the direct access modality in the AF was crafted and agreed in the UN as an alternative to conditionality-spiked, inefficient, bureaucractic funding from MDBs. Among global climate funds, the AF represents today the benchmark in terms of accountability principles, democratic governance and accessible, developing country-sensitive, non-ODA driven financing mechanisms.

The World Bank-crafted document acquired by iCSC shows the World Bank inserting itself as the Philippine funding conduit to the AF. The document shows the World Bank colluding with unwitting officials from the Department of Public Works and Highways (DPWH) and the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA) through a prospective US$15 million AF grant. Under the proposal, the World Bank serves as an intermediary institution that will access the AF on behalf of the Philippines. It carries provisions that:

1. Deliberately contradict the Philippine position in international climate finance talks, which champions the promotion and operationalization of adaptation finance options free of MDB intermediaries.

2. The proposal is not based on the country's adaptation action plan and will likely squander urgently needed financial resources from the AF:

a. The WB proposal intends to fund yet more feasibility studies (costing $2.0 million), for priority investments to be identified under a WB-financed flood management plan, instead of concrete adaptation projects called for by the Philippines. Feasibility studies can be crucial to the realization of a country's agenda, but the effort must be based on a country's agreed priority needs.

b. The proposal will waste $1.514 million to rehabilitate failed projects which, having been based on flawed designs, should probably not have been financed in the first place.

c. The proposal fritters away funds by allocating US$1.0 million to pay for costly "consultancy services" provided by teams whose expertise and accountability will be as suspect as the institution (WB) that will hire them and who may follow WB-designed plans instead of nationally crafted and agreed adaptation action plans.

d. The total project cost of the World Bank proposal amounts to $13.85 million and allocates for the World Bank US$2.0 million representing management costs, bringing the total financing proposal to $15 million. Allowing a 10 percent "corruption" cost - an absurd proposition - still ends up cheaper than paying a 15 percent WB management fee.

This act of climate sabotage is merely the latest move taken by the World Bank against developing country interests. Earlier this June, it approved the "Climate Change Adaptation Project" (CCAP), worth US$55.42 million. Money for this project was pooled under a “co-financing” scheme that bannered a US$4.97M grant (from the GEF) evidently “co-financed” by the Philippines through funds from an existing loan coming from the same source – the World Bank. The loan component for the CCAP amounts to US$50 million, representing around 90 percent of the total project cost, which may end up being counted as new and addtional contributions to adaptation finance from developed countries. Current World Bank energy funding also undercuts the very climate survival agenda of developing countries: five times more money is spent by the Bank to finance climate-polluting fossil fuel projects compared to its allocations for new renewable energy initiatives. #

About the Adaptation Fund

The Adaptation Fund (AF) is the first financial instrument under the UN Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol (KP) that is not based solely on voluntary contributions from donor countries. The Philippines played a central role in pushing for the creation of the AF, which today represents among global climate funds the benchmark in terms of accountability principles, democractic governance and innovative funding modalities.

The AF has the potential to generate greater resources. Unlike other global climate funds, the AF is not ODA-driven and instead "is funded by a 2% levy on Clean Development Mechanism (CDM) transactions. Currently, revenue generated from the CDM levy is projected to be between $160-$950 million (1). Ongoing discussions indicate that the application of levies on international air travel may generate an additional $4-10 billion annually. The AF has also begun to receive bilateral funds, with Spain contributing $60 million recently (2).

The AF is fully accountable to and under the full authority of the UN climate assembly. It is the only fund in the global climate regime composed of a Board mandated to maintain a developing country majority and Least Developed Country seats. Although the World Bank was ultimately chosen as the Trustee of the AF and the Global Environment Facility (GEF) was designated as the Secretariat of the AF Board (a compromise after years of intense debate in the UN), the World Bank can only follow funding instructions emanating from the AF's Board while the GEF serves the AF Board only in a secretariat capacity.

Money provided bilaterally by donor countries to the AF ceases to become bilateral ODA once it enters the AF basin. The AF actually "launders" bilateral donor country contributions in the right way: by mixing bilateral contributions with proceeds from the CDM levy, and with a majority developing country Board that evaluates proposals based on Board-crafted requirements and processes, it strips away strings that might tie recipients of AF funds to conditions emanating from the funding source.

The AF actually has two modalities. One is the multilateral route, where a developing country accesses AF resources by going through Multilateral Implementing Entities (MIE) accredited by the AF, such as the World Bank and the UNDP. The other is the direct access route: through its designated National Implementing Entity (NIE), a developing country directly submits to the AF Board the country's adaptation funding proposal.

At its 9th Meeting on March 23-25 2010 in Bonn, Germany, the Adaptation Fund Board formally operationalized its much-touted Direct Access modality (3). For the first time, the agreement made it possible for developing countries to obtain direct financial support from a multilateral climate fund without the need to take detours through the World Bank or similar multilateral funding institutions. Demands for “direct access” financing stem largely from extensively documented developing country frustrations with institutions such as the GEF and the World Bank.

With the confirmation of the legal capacity of the Adaptation Fund Board (AFB) to discharge its functions (via CMP Decision 1/CMP.4, paragraph 11), the stage is now set to test the direct access modality of the Adaptation Fund. However, the future of the AF and its direct access modality is under threat: if the Kyoto Protocol (KP) is superseded by another agreement, or an agreement is not reached, for instance, it is unclear if the AF will continue to exist as a stand-alone fund or if it will be housed under the UNFCCC. It is likewise unclear if the feature that best distinguishes the AF from other climate funds - its direct access modality - will survive such developments. Clearly, the Philippines must continue to champion the Adaptation Fund in the international climate talks together with the establishment of the direct access modality in other climate funds that will be agreed in the future.

(1) Jessica M. Ayers and Saleemul Huq, "Supporting adaptation to climate change: what role for official development assistance?" paper delivered at the DSA Annual Conference 2008 ‘Development’s Invisible Hands: Development Futures in a Changing Climate.’ 8th November 2008, Church House, Westminster, London.
(2)"Spain contributes 45 million Euros to the Adaptation Fund," Adaptation Fund press release, 28 April 2010.
(3)“The AF is mandated to finance concrete adaptation projects and programmes in developing countries that are Parties to the Kyoto Protocol. The total amount of funds to be made available for eligible developing country Parties will depend on the market-based monetization of Certified Emission Reductions (CERs) which are the AF's main source of revenue. Funding from other sources such as donations may also supplement the proceeds of the monetization of CERs.”
(4) World Bank press release: web.worldbank.org/WBSite/External/Projects 10/08/2010